Plusvalía tax. Can you get it refunded?

Find out about the ‘Plusvalia’ tax and the current controversy surrounding it. What is it? Do you really have to pay?Plusvalía

In theory, the purpose of the Plusvalía is to tax the increase in the value of the land or property that is being sold. For example, let’s say you bought a property 10 years ago. Over this period the town hall has made improvements to the area which has now helped your property or piece of land to increase in value, that difference will be calculated and taxed and the total amount charged will vary depending on how long you have owned the property.

When you sell a property this tax will need to be paid to the local municipality (town hall). At times people who sell property may include a clause in the contract specifying that they are not obligated to pay this tax and it will be up to the buyer to care for this expense. It is important to know that this agreement will not be recognized by the authorities. However, in the case that it remains unpaid, the Town Hall will claim it from the official taxpayer involved in the sale of the property and if the seller cannot be found or he is not a resident of Spain, it will have to be paid by the buyer.

How much tax?

The formula used to work out the tax contains 4 elements:

1. The official value of the land.
2. Number of years the property has been owned by the taxpayer.
3. Coefficient approved by town hall to assess increase.
4. The current tax rate.

The tax rate and coefficient are different in every town hall within certain legal limits.

Example:
Let’s say that your IBI receipt shows an official taxable value (`valor catastral´) to your property of 100,000€.
You have owned the house for 6 complete years.
The approved coefficient in your municipality is 2.7%
The tax is 20%.

100,000 x 6 x 2.7% x 20% = 3,240€

That tax needs to be paid within 6 months after the sale.

Most town halls apply reductions to the ‘Plusvalia’ tax for residents, or for acquisitions other than purchases (i.e an inheritance).
It is also possible in most cases to pay it in installments.

The controversy

Town halls are continuing to charge the seller this tax even if the property is being sold at less than the price they originally paid for it.

The rate is viewed as ‘valor catastral’ (official taxable or rateable value), that is to say, a value that is fixed by the government. Be that as it may, a property may be sold at a much lower rate than it’s original market price. It seems that many local municipalities are not considering this fact.

Following the pre-crisis property boom, the real estate market values rose well above its official valuation. For that reason what appears in the council’s records is not an exact or fair estimation of the true value of land and properties in Spain.

An increasing number of people are now taking legal action.

In December, the Fuengirola town hall was taken to court. A woman who had bought a flat for 220,000 euros sold it for 70,000 euros less its original value. She was dismayed to learn that she still had to pay 5,000 euros of this increased value tax. What was the result? She won the case and the tax was refunded.

Campaigners against the charges, who are increasing in number, argue that the charge violates article 31 of the Spanish constitution which covers taxpayers’ rights.